Investment Rating - The investment rating for the non-ferrous metals sector is "Increase" [5] Core Viewpoints - In Q2 2025, the holdings of non-ferrous metal heavy stocks by active equity funds increased, with significant increases in rare earth and minor metals [1][2] - The total market value of active equity funds' holdings in the non-ferrous metals sector reached approximately 70.4 billion yuan, accounting for 4.29% of the total heavy stock holdings, an increase of 0.07 percentage points from Q1 2025 [1] - The top ten heavy stocks are concentrated in copper, gold, and aluminum, with Zijin Mining remaining the largest heavy stock [1] Summary by Sections Heavy Stock Holdings - The market value of the top ten heavy stocks in the non-ferrous metals sector includes Zijin Mining (22.8 billion yuan), Shandong Gold (4.4 billion yuan), and Zhongjin Gold (3 billion yuan) [1] - The increase in holdings is mainly concentrated in rare earth and minor metal sectors, with the largest increases seen in stocks like Guangsheng Nonferrous (rare earth) and Haotong Technology (platinum, palladium, rhodium recovery) [2] Investment Recommendations - Supply constraints are expected to support the price increases of rare earths, copper, and aluminum, while precious metals will benefit from weakened dollar credit and a rate-cutting cycle [2] - Specific recommendations include: - Rare Earth: Favorable outlook for rare earth prices, with recommendations for Northern Rare Earth and Guangsheng Nonferrous [2] - Copper: Limited supply growth due to reduced capital expenditure, with recommendations for Jincheng Mining, Zijin Mining, and Luoyang Molybdenum [2] - Aluminum: Anticipated supply ceiling for electrolytic aluminum, recommending China Hongqiao [2] - Gold: Positive outlook for gold prices due to weakened dollar credit, with recommendations for Zhongjin Gold and Chifeng Jilong Gold Mining [2] Earnings Forecast and Valuation - The earnings per share (EPS) and price-to-earnings (PE) ratios for key companies are as follows: - Zijin Mining: EPS of 1.21 (2024), PE of 16 (2024) [4] - Luoyang Molybdenum: EPS of 0.63 (2024), PE of 14 (2024) [4] - Jincheng Mining: EPS of 2.54 (2024), PE of 19 (2024) [4] - Western Mining: EPS of 1.23 (2024), PE of 14 (2024) [4] - China Hongqiao: EPS of 2.36 (2024), PE of 8 (2024) [4] - Northern Rare Earth: EPS of 0.28 (2024), PE of 126 (2024) [4]

Investment Rating - The report maintains an "Overweight" rating for the steel and non-ferrous metal industries [1] Core Viewpoints - The supply-side reform in China is expected to break the deflationary cycle and create investment opportunities in the steel and non-ferrous metal sectors [1][6] - The report emphasizes the importance of "supply constraints" to manage the supply-demand balance and mitigate economic downturn risks [6][12] - The steel industry is facing severe overcapacity, with state-owned enterprises holding a significant market share, which facilitates the implementation of administrative measures to control production [6][28] Summary by Sections 1. Supply-Side Reform and Economic Management - The socialist market economy in China allows for effective macroeconomic control, contrasting with the cyclical issues faced in capitalist economies [12][13] - Historical experiences show that demand stimulus alone is insufficient to resolve deep-seated deflationary pressures [14][15] - The supply-side reform initiated in 2016 has proven successful in stabilizing prices and improving corporate profitability [21][22] 2. Steel Industry Analysis - The steel industry has been in a state of oversupply from 2007 to 2024, with crude steel production increasing from 490 million tons to 1.01 billion tons, while apparent consumption has not kept pace [28][29] - The production capacity utilization rates for rebar and wire rod are expected to decline from around 70% to 50% due to weak real estate demand [33][34] - The concentration of production among state-owned enterprises is high, with central state-owned enterprises accounting for approximately 63% of total production in 2024 [38][39] 3. Investment Recommendations - The report suggests focusing on three categories of investment targets: profit recovery, stable profit with valuation repair, and stable high-dividend stocks [51] - Specific companies recommended for profit recovery include Liugang Co., Taigang Stainless Steel, and Shandong Iron and Steel, with projected annualized PE ratios improving significantly under favorable conditions [51]

Group 1 - The metal zinc concept declined by 1.18% as of the market close on July 16, ranking among the top declines in the sector, with companies like Tibet Summit, Wolong New Energy, and Xingye Silver Tin experiencing significant drops [1][2] - Among the concept stocks, ST Shengtun, Hongda Co., and Smart Agriculture saw increases of 1.39%, 0.83%, and 0.64% respectively, while the majority faced declines [1][2] - The metal zinc sector experienced a net outflow of 378 million yuan, with 27 stocks seeing outflows, and five stocks with outflows exceeding 30 million yuan, led by Hunan Gold with a net outflow of 92.37 million yuan [1][2] Group 2 - The top stocks with net outflows included Hunan Gold, Xingye Silver Tin, and Western Mining, with outflows of 92.37 million yuan, 80.25 million yuan, and 47.64 million yuan respectively [1][2] - Conversely, the stocks with the highest net inflows were Zijin Mining, ST Shengtun, and Wolong New Energy, attracting net inflows of 24.11 million yuan, 20.38 million yuan, and 18.43 million yuan respectively [1][2] - The trading activity in the metal zinc sector showed a significant turnover rate, with Hunan Gold at 1.90% and Xingye Silver Tin at 2.89%, indicating active trading despite the overall decline [1][2]

Summary of Conference Call Notes Company and Industry Involved - The conference call discusses a mining company involved in copper, lead, and zinc production, with a focus on their operational performance and production plans for the year. Key Points and Arguments Production and Sales Performance - The company reported a stable mineral production output, with a quarter-on-quarter increase in production from Qianxin, which is primarily sourced from Inner Mongolia's Xibu Copper Industry and Huokqi Copper Mine [1] - In Q1, the copper-gold mine production reached 26% of the annual target, indicating a potential to exceed the previously set goal of 168,000 tons for the year, despite a planned reduction of 10,000 tons compared to last year [3] - The company plans to conduct major maintenance in December, which is typically the month with the most adverse mining conditions [4] Financial Performance and Challenges - The copper smelting segment is under pressure, with processing fees currently negative at $30, leading to a loss in Q1 despite an increase in profits compared to the previous year [5][6] - The company aims to reduce losses in the copper smelting segment by improving raw material structure and increasing procurement of lower-cost mixed ores [7] - The overall processing fees for domestic copper are lower than imported copper, with processing costs ranging from 4,800 to 5,300 [9] Raw Material Supply and Procurement - The company anticipates a stable supply of raw materials, with a significant portion of lead and zinc needing to be sourced externally due to insufficient internal production [12][13] - The supply of new raw materials is expected to improve compared to previous years, with lower procurement difficulties noted [13] Cost Management and Future Outlook - The complete cost of copper and lead production is reported to be stable, with expectations of cost reductions as new projects come online [16][17] - The company is focusing on internal management improvements and cost reduction strategies to enhance profitability in the coming year [8] Project Developments - The company is progressing on the Phase III expansion project at Yulong Copper Mine, expected to be completed by late next year, with a short production ramp-up time anticipated [22][23] - The total investment for the project is estimated at 5 billion, with cash flow management indicating that the company can handle the financial burden over the next few years [23] Miscellaneous - The company has experienced a return to asset impairment of 60 million, primarily due to previous inventory adjustments, but expects this to be less significant than last year [20] - The company is actively engaging in exploration and resource expansion as a key focus area for future growth [24] Other Important but Overlooked Content - The company is not currently signing long-term contracts for processing fees, indicating a cautious approach to market fluctuations [9] - The Q1 performance of the company shows a cumulative revenue of 3.1 billion with a profit of 1.89 billion, reflecting a strong operational performance despite market challenges [15]

Summary of Conference Call Records Company and Industry Involved - The discussion revolves around a mining company involved in the production of metals such as lead, copper, and iron, with specific references to operations in Lhasa and Golmud [1][2]. Core Points and Arguments - **Metal Production Focus**: The company is currently focusing on key metals such as lead, copper, and iron, with a specific emphasis on carbonization or storage enhancement methods [1]. - **Market Value Assessment**: The Qinghai State-owned Assets Supervision and Administration Commission has set market value assessment measures for the company, which will directly impact the annual salary of the company's leadership [1]. - **Stable Production at Horgos**: The production at Horgos is expected to remain stable at around 15,000 tons, with minor shortfalls in the first quarter expected to be compensated later in the year [2]. - **Copper Procurement Needs**: The company’s Qinghai Copper Industry requires 120,000 tons of copper-gold ore, which is anticipated to be fully sourced from its subsidiary, Yulong [2][3]. - **Investment Losses**: The company reported a loss of 220 million from futures trading, which is attributed to procurement activities related to its agricultural supply chain [3][4]. - **Inventory and Sales Timing**: As of March, the company has a two-week inventory, with sales expected to ramp up in the second quarter due to weather-related transportation issues affecting sales in the first quarter [4]. - **Dividend Expectations**: The company anticipates that if product prices remain stable, the dividend levels for the current year will be similar to the previous year, with calculations based on cash flow rather than fixed ratios [5]. - **Optimistic Market Outlook**: There is a general optimism regarding the price trends of metals, despite previous impacts from trade wars on stock prices. The company’s operations are reported to be stable, with a high self-sufficiency rate in raw materials for smelting [6]. Other Important but Possibly Overlooked Content - **Impact of Trade Wars**: The company has noted that the trade war has had a significant initial impact on stock prices, but the overall effect on operations is minimal due to the company's low reliance on imports and exports, except for lead-gold ore [6].

Core Viewpoint - The company is facing significant investor concerns regarding its hedging strategies and financial performance amid rising copper prices, with calls for a reassessment of its risk management approach [2][3][10]. Financial Performance - As of July 14, 2025, the company's stock closed at 16.41 yuan, down 0.55%, with a turnover rate of 1.54% and a trading volume of 366,800 hands, amounting to a transaction value of 604 million yuan [1]. - The company has reported substantial losses from hedging activities, totaling over 1 billion yuan in the past two years, raising questions about its financial stability and strategy [7][11]. Hedging Strategy - Investors have expressed concerns that the company's hedging strategy has not effectively mitigated risks, particularly during periods of rising copper prices, leading to losses instead of profits [2][3][5]. - The company acknowledges the need to optimize its hedging strategies and has indicated a willingness to adjust its approach based on market conditions and risk assessments [3][10][11]. Market Conditions - Recent data indicates a significant decline in copper inventories, with LME copper stocks dropping to 9.3 million tons and SHFE copper stocks at 2.1 million tons, raising concerns about potential supply shortages and price volatility [4][9]. - The company is monitoring market dynamics closely, particularly the risks associated with potential short squeezes in the copper futures market, and is considering adjustments to its hedging ratios [5][10][11]. Investor Relations - The company has been responsive to investor feedback, acknowledging concerns about its hedging practices and the impact on shareholder value, and has committed to enhancing transparency and communication [3][6][10].

Group 1 - The metal zinc concept declined by 1.46%, ranking among the top declines in the concept sector, with major companies like Zijin Mining, Zhuhai Group, and Western Mining experiencing significant drops [1][2] - Among the companies in the zinc sector, Dazhong Mining, Smart Agriculture, and Zhejiang Fu Holdings saw increases of 10.05%, 3.19%, and 0.95% respectively [1][3] - The zinc concept sector experienced a net outflow of 1.371 billion yuan, with 28 stocks seeing net outflows, and 8 stocks with outflows exceeding 50 million yuan [2][3] Group 2 - The top net outflow stock was Zijin Mining, with a net outflow of 625.26 million yuan, followed by Hunan Gold and Xiyang Co., with net outflows of 154.87 million yuan and 87.99 million yuan respectively [2][3] - The stocks with the highest net inflows included Dazhong Mining, Smart Agriculture, and Western Mining, with net inflows of 82.13 million yuan, 61.00 million yuan, and 35.24 million yuan respectively [2][3] - The overall performance of the zinc sector reflects a challenging market environment, with several companies facing significant capital outflows [1][2]

Investment Rating - The report maintains an "Accumulate" rating for the non-ferrous metals sector [6]. Core Viewpoints - The report indicates that copper prices are expected to rise in 2025 due to tightening supply and improving demand [4]. - The report highlights a continued weakening in demand, particularly in the cable sector, with risks of further declines in production rates for air conditioning units [1][3]. - The report notes that the short-term risk of warehouse squeezing remains, suggesting that copper prices may continue to show strength before returning to a more volatile state [1]. Supply and Demand Summary - **Production**: In June 2025, China's electrolytic copper production was 1.1349 million tons, a decrease of 0.3% month-on-month but an increase of 12.9% year-on-year [3][65]. - **Demand**: The cable industry's operating rate decreased by 2.4 percentage points, with the operating rate for cable enterprises at 67.81% as of July 3, 2025 [3][75]. - **Inventory**: Domestic copper social inventory increased by 1.3%, while LME copper inventory rose by 5.1% [2][24]. Raw Material Insights - **Copper Concentrate**: Domestic copper concentrate inventory at major ports was 666,000 tons, up 6.8% week-on-week as of July 4, 2025 [2][49]. - **Scrap Copper**: The price difference between refined copper and scrap copper decreased by 260 RMB/ton, indicating a tighter supply of scrap copper [2][54]. Futures Market Overview - The active contract position for SHFE copper increased by 1.3% week-on-week, with a total position of 216,000 lots as of July 4, 2025 [4][33]. Company Profit Forecasts and Valuations - **Western Mining**: Stock price at 17.10 RMB, with EPS forecasts of 1.67 RMB for 2025, and a PE ratio of 10 [5]. - **Zijin Mining**: Stock price at 20.05 RMB, with EPS forecasts of 1.60 RMB for 2025, and a PE ratio of 13 [5]. - **Luoyang Molybdenum**: Stock price at 8.54 RMB, with EPS forecasts of 0.62 RMB for 2025, and a PE ratio of 14 [5]. - **Jincheng Mining**: Stock price at 45.42 RMB, with EPS forecasts of 3.61 RMB for 2025, and a PE ratio of 13 [5].

Investment Rating - The investment rating for the non-ferrous metals industry is "Positive" (maintained) [4][106]. Core Views - The report highlights that copper prices are experiencing fluctuations due to the interplay of the 232 investigation and interest rate cut expectations, with recent price changes showing a mixed trend [5]. - The report emphasizes the importance of low inventory levels in supporting copper prices, while also noting the potential impact of the 232 copper import investigation and upcoming interest rate decisions by the Federal Reserve [5]. - The report suggests monitoring companies such as Zijin Mining, Luoyang Molybdenum, Jincheng Mining, and Western Mining for investment opportunities [5]. Summary by Sections 1. Industry Overview - The report provides insights into macroeconomic indicators, including U.S. employment data, which may influence market conditions [9]. - The non-ferrous metals sector's performance is analyzed, with the sector underperforming compared to the Shanghai Composite Index [11]. 2. Industrial Metals 2.1 Copper - Recent price movements show LME copper up by 0.25%, while SHFE copper is down by 0.24% [25]. - Inventory levels for copper have increased, indicating a potential shift in market dynamics [25]. 2.2 Aluminum - LME aluminum prices increased by 0.41%, with inventory levels also rising [35]. - The report notes a decrease in aluminum smelting profits, attributed to rising costs [35]. 2.3 Lead and Zinc - Lead prices have seen a slight increase, while zinc prices have decreased [48]. - Inventory levels for both metals are discussed, highlighting market supply conditions [48]. 2.4 Tin and Nickel - Tin prices have decreased slightly, while nickel prices have shown an upward trend [62]. - The report discusses profitability metrics for nickel producers in both domestic and international markets [62]. 3. Energy Metals 3.1 Lithium - Lithium prices have shown a slight rebound, with specific price changes noted for lithium carbonate and lithium spodumene [74]. - The report indicates that supply-side adjustments are anticipated, which may affect future pricing [74]. 3.2 Cobalt - Cobalt prices have increased domestically due to export bans from the Democratic Republic of Congo, which may create supply constraints [86]. - The report highlights the profitability of domestic cobalt refining operations [86].

Group 1: Core Insights - The newly revised Mineral Resources Law aims to create a new policy framework for high-quality development in China's mining industry through market-oriented reforms, ecological restoration, and strategic resource security [1] - Western Mining, as a leading domestic mining enterprise, is positioned to benefit from multiple policy incentives due to its resource reserves and strategic layout capabilities [1] Group 2: Market and Regulatory Changes - The new law stipulates that mining rights will primarily be granted through competitive methods such as bidding and auction, reducing administrative intervention and enhancing market transparency [1] - The establishment of a "direct access" system for exploration rights to mining rights will significantly improve the efficiency of converting exploration rights into mining rights, thereby shortening development cycles [2] Group 3: Environmental and Financial Aspects - The new law emphasizes the ecological restoration responsibilities of mining rights holders throughout the lifecycle, allowing restoration costs to be included in production expenses, which supports compliant mining operations [2] - Western Mining has developed a mature ecological restoration system, exemplified by the Yulong Copper Mine expansion project, which balances environmental protection and development [2] Group 4: Strategic Resource Development - The new law includes copper, lead, and zinc in the list of strategic minerals, ensuring higher priority for development of Western Mining's key resources like Yulong Copper Mine and Xitie Mountain Lead-Zinc Mine [2] - The separation of mining rights from administrative licensing expiration enhances the stability of Western Mining's mining rights, reducing operational interruption risks [3] Group 5: Operational Efficiency and Growth Potential - Western Mining's dividend payout ratio for 2024 is projected to reach 81%, with the new law expected to further enhance asset liquidity and financing capabilities for expansion projects [3] - The company is leveraging its low-cost copper and salt lake resources to strengthen its competitive position, with ongoing training to adapt to regulatory requirements [3] Group 6: Future Outlook - Current copper prices are fluctuating at high levels, and with the new law's market-oriented policies taking effect, Western Mining is expected to release performance elasticity driven by resource reserves, policy incentives, and expansion plans [4] - The company is anticipated to play a more significant role in ensuring national resource security and promoting high-quality industry development [4]